Main economic indicators of the European Union and the euro (EUR)

The indicators presented below are of great importance for the euro, since the EMU (Economic and Monetary Union) consists of 19 countries (out of the European Union's 28 countries) which have adopted the single euro currency.

It is therefore important for a trader to be aware of major political and economic developments in the member countries, such as changes in GDP, unemployment and inflation.

The largest economies in Europe's EMU are Germany, France and Italy, so economic information from these three countries is the most important for the euro.

Provisional gross domestic product

The preliminary GDP is published when Eurostat has accumulated information from a sufficient number of countries to be able to provide an adequate estimate, usually 30 days after the end of each quarter for the quarterly GDP of the euro area (EA) and the European Union (EU). The totals, which are calculated annually for the European Union and for the EMU, are a simple sum of all of the countries' GDP figures. This indicator shows the wealth created by the EU during a given period.

Industrial production in Germany

Data on Germany's industrial production are seasonally adjusted and broken down into 4 categories: manufacturing, mining, energy and construction. As a whole, the manufacturing industry consists of 4 main product groups: basic & production goods, capital goods, consumer durables and non-durable consumer goods. Typically, the market tends to closely follow the exchange rate and the seasonally adjusted monthly figure. Data on German industrial production is important because it is the euro zone's largest economy, but the market can also react to data on French industrial production. The initial publication of this report is presented with a more limited sample of information, which is subject to revision when the full sample is available. On some occasions, Germany's Ministry of Finance reports the expected direction of the revision of the originally published data.

Inflation indicators

Harmonised consumer price index

The EU's Harmonised Index of Consumer Prices (HICP) is an indicator published by Eurostat. It was created to compare the various EU countries (as required by EU legislation). The HICP has been published by Eurostat since January 1995. The price information is collected by the various national statistical agencies of each country, which must provide Eurostat with the data used to calculate the HICP. On the basis of this information, Eurostat calculates the HICPs of each country as a weighted average of these sub-indices; for each country, the weights used in the calculation are specific. The publication of the HICP takes place at the end of the month following the reference period (around 10 days after the publication of the CPIs of France and Spain, the latest EMU countries to publish this data). This information is important for the market, as although some of it is already available to investors at the time the HICP is published, it is used by the ECB (European Central Bank) as a benchmark for inflation. The ECB aims to keep the euro area's inflation within a range of 0 to 2%.

M3 money supply

M3 money supply is a general measure of Europe's money supply, covering everything from bank deposits to bills and coins. M3 is closely monitored by the ECB as it is considered a key indicator of inflation in Europe. In December 1998, the ECB's Governing Council set its first benchmark for the rise of the M3 to 4.5%, a value that allows inflation to fall below 2%, to the trend growth of 2% to 2.5% and the slowdown in the long-term velocity of the currency from 0.5 to 1%. The growth rate is monitored as a 3-month moving average, in order to avoid monthly volatility that could distort aggregate information. The ECB's monetary targets have been created in such a way as to allow sufficient room to maneuver and interpret things. Since it does not impose M3 growth ranges, as the Bundesbank did, there are no automated measures when the growth of M3 varies significantly from the reference value. Similarly, if the ECB considers M3 as a key indicator, it also takes into account changes in other monetary figures.

German unemployment

Data published by the Federal Ministry of Labour and Social Affairs (Bundesministerium für Arbeit und Soziales, BMAS) contains information on the number of unemployed as well as on changes during the previous month. Monthly unemployment figures are either seasonally adjusted (SA) or non-adjusted. The non-adjusted unemployment rate contains information on job vacancies, number of employees and part-time jobs. One hour after the Federal Ministry of Labour's publication, the Bundesbank publishes the SA unemployment index. It is common for trade union sources to filter data the day before official publication, particularly with regard to the unemployment level of millions of people in the non-adjusted figures. When Reuters presents the exact non-adjusted unemployment figure and indicates that it was provided by "sources", the leak usually reflects official data. Rumours are also common a week before the official declaration, although they tend to be rather vague. In this case, it is important to be cautious when interpreting reports based on rumours, because the German authorities' statements are sometimes translated and reproduced by the international press in an unreliable and dubious way.

Germany's IFO survey

As mentioned above, Germany is by far Europe's biggest economy, accounting for over 30% of the region's GDP. An analysis of German economic conditions is considered as a general look at Europe. The IFO is a monthly study conducted by the Institute for Economic Research, in which over 7,000 German company CEOs and leaders are invited to assess the business climate of the country as well as their short-term business plans. The initial publication of the results includes the business climate as the main data as well as its two weighted sub-indices: general business conditions and business expectations. In general, the range spans from 80 to 120; the higher the figure, the more positive the business climate. However, this index is more useful when compared with its previous values.

The budget deficit

According to the stability and growth pact, countries must maintain their deficit below 3% of GDP. Each country sets targets to further reduce the deficit and, in each case, financial market participants, such as forex traders, pay particular attention when these objectives are not achieved, as this may lead to movements of these countries' currency rates. For example, when a country's deficit reduction targets are not achieved, the impact on its currency is generally negative.